We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of June. At Insider Monkey, we follow nearly 835 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Stag Industrial Inc (NYSE:STAG), so let’s take a closer look at the sentiment that surrounds it in the current quarter.
Is Stag Industrial Inc (NYSE:STAG) a great investment today? The smart money is taking a bearish view. The number of long hedge fund positions retreated by 6 lately. Our calculations also showed that STAG isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 41 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Israel Englander of Millennium Management
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to check out the recent hedge fund action regarding Stag Industrial Inc (NYSE:STAG).
How are hedge funds trading Stag Industrial Inc (NYSE:STAG)?
At the end of the fourth quarter, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of -25% from the third quarter of 2019. On the other hand, there were a total of 12 hedge funds with a bullish position in STAG a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Balyasny Asset Management was the largest shareholder of Stag Industrial Inc (NYSE:STAG), with a stake worth $32.3 million reported as of the end of September. Trailing Balyasny Asset Management was Millennium Management, which amassed a stake valued at $20.4 million. Renaissance Technologies, Marshall Wace LLP, and Motley Fool Asset Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Hill Winds Capital allocated the biggest weight to Stag Industrial Inc (NYSE:STAG), around 5.32% of its 13F portfolio. Forward Management is also relatively very bullish on the stock, designating 1.01 percent of its 13F equity portfolio to STAG.
Due to the fact that Stag Industrial Inc (NYSE:STAG) has faced declining sentiment from the entirety of the hedge funds we track, logic holds that there were a few funds that slashed their positions entirely last quarter. Intriguingly, Stuart J. Zimmer’s Zimmer Partners dropped the biggest investment of all the hedgies watched by Insider Monkey, valued at about $44.2 million in stock. Clint Carlson’s fund, Carlson Capital, also said goodbye to its stock, about $43.7 million worth. These transactions are important to note, as total hedge fund interest fell by 6 funds last quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Stag Industrial Inc (NYSE:STAG) but similarly valued. These stocks are Lazard Ltd (NYSE:LAZ), ALLETE Inc (NYSE:ALE), Affiliated Managers Group, Inc. (NYSE:AMG), and LogMeIn Inc (NASDAQ:LOGM). This group of stocks’ market caps match STAG’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| LAZ | 14 | 701694 | -1 |
| ALE | 25 | 252011 | 3 |
| AMG | 38 | 548063 | 15 |
| LOGM | 31 | 504016 | -1 |
| Average | 27 | 501446 | 4 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 27 hedge funds with bullish positions and the average amount invested in these stocks was $501 million. That figure was $126 million in STAG’s case. Affiliated Managers Group, Inc. (NYSE:AMG) is the most popular stock in this table. On the other hand Lazard Ltd (NYSE:LAZ) is the least popular one with only 14 bullish hedge fund positions. Stag Industrial Inc (NYSE:STAG) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but beat the market by 5.5 percentage points. Unfortunately STAG wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); STAG investors were disappointed as the stock returned -33.9% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in Q1.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
